UNMARRIED INDIVIDUALS AND ESTATE PLANNING ISSUES PRESENTED BY: - PDF document

UNMARRIED INDIVIDUALS AND ESTATE PLANNING ISSUES PRESENTED BY: DIANE J. KIEPE, ATTORNEY AT LAW DOUGLAS, EDEN, PHILLIPS, DeRUYTER & STANYER, P.S. 717 West Sprague Avenue, Suite 1500 Spokane, WA 99201-3923 djkiepe@depdslaw.com www.depdslaw.com (509) 455-5300 (509) 455-5348

Special thanks to Kevin Sell, CPA, HMA CPA, Cory Violette, CLU, Washington Trust Bank Investment Services, PJ Watters, Director of Gift Planning, Inland Northwest Community Foundation, Sarah Carlson, CFP, CLU, ChFC, Founder and President of Fulcrum Financial, and Brent Stanyer, Attorney, Douglas, Eden, Phillips, DeRuyter & Stanyer, each of whom took time to discuss various matters related to planning for the unmarried person. As planners much of our work involves the married couple; we strategize for, among other things, to optimize tax savings, strike the balance between saving for the future and living for today, care for minor or disabled children, and trying to ensure that a client’s objectives are understood and met, to the extent practical. That being said, a large part of the population remains, or becomes, “unmarried” for various reasons (by choice to never marry, divorce, death of a spouse). These clients have planning needs which in many ways are similar to their married counterparts but in many ways are vastly different due to their “single status”. The key planning points which remain the same regardless of one’s marital status are that every plan should be unique to fit the individual’s personal circumstances and second, a client will be better served by a holistic approach to their planning versus a single professional advising the client on all points involved with his/her plan. There certainly are other overlapping matters but these are the two foundational similarities. Below are some considerations to consider in planning for various groups of single persons. Where a matter is addressed in a particular area it is purely because it is most associated with or most relevant to that group of people. A. Co-Habitation and Estate Planning : 1. Statutory Rights : Washington statutory law does not provide legal rights for parties who elect not to marry but rather to live together in a committed relationship. The only way to ensure a partner receives a portion of one’s estate at death is to have a valid written instrument disposing of property at death (trust or will or titling property in such a way that it passes automatically upon death). 1

2. Equitable Rights : If there is no transfer of assets under one of the methods stated above, the surviving partner may attempt to receive property from the decedent’s estate under a variety of equitable theories. (a) Meretricious Relationship : The concept of Meretricious Relationship was first developed in the context of the dissolution of a relationship where the parties were unmarried but cohabitated together as a couple. The principal, which is a judicial doctrine based in equity, was adopted by Washington courts to make an equitable division of property that would have been community property if the couple had been married. A Meretricious Relationship has been defined by the Washington Supreme Court as “a stable, marital-like relationship where both parties cohabit with the knowledge that a lawful marriage between them does not exist.” In essence it’s a facts and circumstance test (continuous cohabitation, length of relationship, pooling of resources, purpose of the relationship, and other facts of relevancy) with no one factor given prominence over another. In In Re Estate of Langland , 312 P.3d 657, 177 Wn.App. 314 (Wash.App.Div 1, 2013), the Washington Court of Appeals confirmed that the application of the principals of property division in the case of a meretricious relationship is appropriate when one party survives the other. The court however refused to apply the Washington intestacy laws to the surviving partner. The court, adhering to the rule stated by the Washington Supreme Court in Peffley-Warner v. Bowen , 113 wn2D 243, 253, 778 p.2D 1022 (1989), confirmed that the inheritance of the survivor in an unmarried, cohabitating relationship, is not based on laws of inheritance but based on concepts of equity, contract or trusts. (b) Tracing the Source of Funds : Property acquired with contributions from both partners is held as tenants in common and presumed to be owned by each in proportion to the contribution made by each. (c) Trust Fund Theories . (1) Resulting Trust : Property taken in the name of one person by another person who has provided consideration for such property has equitable interest in such property absent any other evidence of intent. 2

(2) Constructive Trust : Property obtained by one who obtained or retained such property by unjust means may be deemed, by court order, to be holding the property for another. (d) Contract Theory : Contract must be shown to have existed between the parties (offer, acceptance and consideration). (e) Implied Partnership/joint venture. The existence of a partnership/joint venture may be based on an implied contract which can be assumed to exist based on the facts and circumstances of the situation. Similar to the principal of Meretricious Relationship, no one fact or circumstance will be taken as conclusive. (e) Tortious Interference with Gift or Inheritance . A tort recognized in several jurisdictions which holds that “one who by fraud, duress or other tortious means, intentionally prevents another from receiving from a third person an inheritance or gift that he would otherwise have received is subject to liability to the other for loss of the inheritance or gift”. Not recognized or rejected in Washington State at this point. B. Legally Separated/Divorced. This topic was covered in detail at November SEPC meeting but some points for reference are as follows: 1. Effect of Divorce on Will. RCW 11.12. 051 (1) provides, in part, that, if, after making a will, the testator's marriage or domestic partnership is dissolved, invalidated, or terminated, all provisions in the will in favor of or granting any interest or power to the testator's former spouse or former domestic partner are revoked, unless the will expressly provides otherwise. Provisions affected by this section must be interpreted, and property affected passes, as if the former spouse or former domestic partner failed to survive the testator, having died at the time of entry of the decree of dissolution or declaration of invalidity. Note: the filing for a divorce of legal separation has no effect on one’s Will – it may be prudent to do an update of one’s Will prior to the entry of Dissolution. 2. Effect of Divorce on POD Assets. RCW 11.07.010(2)(a) provides, in part, if a marriage or state registered domestic partnership is dissolved or invalidated, or a state registered domestic partnership terminated, a provision made prior to that event that relates to the payment or transfer at death of the decedent's interest in a nonprobate asset in favor of or granting an interest or power to the decedent's former spouse or state registered domestic partner, is revoked. A provision affected by this section must be interpreted, and the nonprobate asset affected 3